Business Combinations Phase II

Date recorded:

The Board discussed issues where the IASB and FASB have reached different conclusions.

The first is the treatment of an excess of the consideration paid over the fair value of the acquirer's interest in the business acquired (the overpayment). The IASB requires this to be taken to profit or loss and the FASB requires it to be subsumed within goodwill. The Board continued to believe they have the better principle and would prefer to expose on this basis and ask a specific question as to reliability of measurement and other problems. If FASB did not agree to this the IASB will expose the FASB requirement.

The second relates to the IASB conclusion that there is a rebuttable presumption that the consideration paid provides the best evidence of the fair value of the business acquired. The FASB believes that this would normally be the case and should be used when 100% of a subsidiary is acquired but should not be a rebuttable presumption when a partial interest is acquired. The IASB agreed to move to the FASB requirement.

The third relates to differences in the IASB's and FASB's application guidance on the definition of a business. The IASB agreed to move to the FASB guidance together with an explanation in the Basis for Conclusions on the implication of the differences.

The Board noted various inherited differences, some of which will be dealt with in the short-term convergence project and some of which will need to be dealt with in later projects.

The Board noted a summary of decisions taken to date.

In response to a query regarding field testing of the full goodwill method, the staff noted they would be observing the FASB's field visits with preparers. The FASB staff noted that their user consultative group were in favour of the full goodwill method as they believed it provided more useful information.

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